Industrial Startups — How To Determine Your Funding Strategy
Startups in the industrial sector face a particularly hard challenge of hitting product-market-fit (PMF) fast. This is due to a variety of reasons:
Complex Factory Stack, i.e. integrations with different machines/processes/systems.
Long sales cycles, i.e. many cross-functional stakeholders involved.
Market readiness/education, i.e. a limited solution or even problem awareness.
Having that in mind, an unclear or delayed PMF means that it will likely be tough for you to show tremendous growth at the early stage, and investors might be hesitant to invest in a business which shows very little validation at the beginning. From my personal experience, even many early-stage investors will want to see revenue progress fast and will often assess you using their “traditional framework”, for example expecting $10k of MRR before considering investing. This can be misleading as industrial startups have the potential for enormous expansion, customer stickiness and a good chance to really accelerate and show very strong growth when they hit PMF, yet many investors underestimate this and are afraid to invest before that stage.
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The way I look at it, the difference in the development of these companies can be easily illustrated in this way: